From Switzerland to River Falls, school taxpayers catch big breakThe outcome of a recent special school board meeting for the sale of millions of dollars of bonds was better than anyone dreamed.
By: Phil Pfuehler, River Falls Journal
The outcome of a recent special school board meeting for the sale of millions of dollars of bonds was better than anyone dreamed.
School Finance Director Chad Smurawa said interest rates for municipal bonds had hit a 30-year low, then dipped again since December.
As a result, the school board accepted a very favorable low bid on the sale of $15,660,000 in general obligations bonds.
Most of it applied to last November’s referendum. The rest was refinanced debt from building the high school a decade ago.
The winning bid with an interest rate of 2.48% went to United Bank of Switzerland. UBS actually partnered with J.P. Morgan Securities and Citibank, both of New York, plus Wiley Brothers of Nashville for the combined low bid.
When school officials built a case for a referendum and its costs to taxpayers last summer, the interest rate for borrowing was conservatively estimated at 3.45%.
UBS and its partners was one of eight bidders for the municipal bonds. The school district’s financial advisor, Ehlers & Associates, said a bond sale of this size typically draws only two or three bidders.
The other higher bidders came in with interest rates ranging from 2.5094% to 2.8305
Smurawa said the result -- for the school district and its taxpayers -- was “phenomenal.” Here’s why:
- The refinancing of $4 million-plus debt for the high school will save $420,760 over the next nine years.
- Borrowing for the $19 million referendum question that passed will occur in two phases. The first phase, for $11,435,000, was last week. The lower-than-anticipated interest rate cut interest payments for the next 18 years from a projected $4,950,000 to $3,827,326 -- a savings of more than $1 million.
This fall the school district will sell more bonds for the rest of the referendum project totaling $7.6 million.
During last week’s special meeting, Ehlers told the school board that if interest rates stay low for that bond sale, the referendum’s impact on district taxpayers will be further minimized.
Smurawa said Ehlers’ preliminary estimate of the referendum’s tax impact was:
- For a $100,000 property, instead of an extra $30 a year in school taxes, the increase would be only $13.
- For a $200,000 property, instead of an extra $60, a yearly increase of $26.
- For a $300,000 property, instead of an extra $90, an increase of $39.
These are just estimates based on last week’s bond sale. Final figures won’t be confirmed until the second bond sale this fall.